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Slide 1
Financial Decisions and
Planning
Slide 2
What Are Needs and Wants?
• Needs are things you must have.o Examples: food, clothing, shelter
• Financial resources are used to acquire goods and services.
• Wants are things people desire.o Examples: new cars,
vacations, luxury items
Slide 3
How Are Income and Wealth Measured?• Personal cash flow statement lists cash
inflows and outflows.o Inflows = incomeoOutflows = expenses
• Personal net worth statement shows a person’s net worth based on assets and liabilities.o Assets = money or items of valueo Liabilities = debts
How Is Wealth Measured?
4-1 Resources and Choices
PERSONAL NET WORTH STATEMENT
Assets Liabilities
Cash and checking account $ 452.56 Car loan $1,100.00
Savings account 500.00 Credit card debt 200.98
Savings bond 300.00 Total liabilities $1,300.98
Baseball card collection 100.00
Computer, iPod, games 300.00
Car, current value 3,000.00 Net Worth
Total assets $4,652.56 Assets minus liabilities 3,351.58
Total liabilities and net worth $4,652.56
Net Worth
How Can You Make Good Financial Choices?Decision-Making Process1.Define the need.
2.List options for meeting the need.
3.Compare the options.o Consider the opportunity cost—the value of your
next best option.
4.Make a decision.
5.Take action based on your decision.
6.Reevaluate your choice.
Slide 6
Building Communications Skills
Reading Vocabulary• Try to learn the meaning of a word by seeing
how it is used in a sentence.• Divide a long word into parts.• Look up a word in the dictionary.• Look up a word in the glossary.• Practice using new words in conversation or
writing.
Slide 7
What Is the Purpose of Budgeting?• A budget is a spending
and saving plan.
• It is based on estimated income and expenses.
• Use spreadsheet software to prepare a budget.
Slide 8
How Do You Prepare a Budget?
• Step 1: Estimate income
• Step 2: Plan savings
• Step 3: Estimate expenseso Variable expenseso Fixed expenseso Charitable giving
• Step 4: Balance the budget
Slide 9
Personal Budget
Income Weekly Monthly Yearly
Work (part-time) $30.00 $120.00 $1,440.00Allowance for household chores 10.00 40.00 480.00Lunch money allowance 15.00 60.00 720.00Savings account interest .50 2.00 24.00Total income $55.50 $222.00 $2,664.00
Savings
Deposit to savings account $ 5.50 $ 22.00 $ 264.00
Expenses
Gifts $ 5.00 $ 20.00 $ 240.00Clothes and shoes 15.00 60.00 720.00Loan payment to parents 5.00 20.00 240.00Lunches 15.00 60.00 720.00Entertainment/miscellaneous 10.00 40.00 480.00Total expenses $50.00 $200.00 $2,400.00
Total savings and expenses $55.50 $222.00 $2,664.00
Slide 10
Focus On . . .
Philanthropy • Philanthropy is a form of charitable giving.• It supports a societal cause.• It often lasts for an extended period of time.• It is the primary source of funding for the fine
arts, performing arts, and most religious and humanitarian causes.
Slide 11
Success Skills
Dealing With Conflict• Stop and take a ten-second time out.
o Ask “what is happening here?”o Listen rather than talk.
• Suggest that you continue your talk later.• Focus on the problem, not the person.• Be objective.• Be willing to compromise when
appropriate.
Slide 12
What Is Financial Planning?
• Financial planning is a process of looking at your current financial situation and thinking about your future.
• A financial plan has personal and financial goals along with steps and a timeline.
• Review and update your financial plan periodically.
Slide 13
What Is Financial Planning?
• Step 1: Gather financial information
• Step 2: Analyze information
• Step 3: Set goalso Personal and financial
• Step 4: Develop a timeline and benchmarks
• Step 5: Implement and evaluate the plan
Slide 14
Financial Plan (One Goal)
FINANCIAL PLAN
Net worth on April 1, 20--: $525.56
Personal Goal Financial Goal Benchmarks Timeline
Live in my own house in the country.
Buy a house in the country.
1. Save money for a down payment ($12,000)
5 years
• Set aside $200 per month
Once per month
• Open a separate account for money saved
April 8 (next week)
• Talk to a mortgage broker to get prepared
Make an appointment for April 15
2. Get a job that provides enough income to make monthly payments
2 years
Slide 15
Where Can You Get Good Financial Advice?• Financial planners
• Financial experts
• Newspapers and magazines
• Seminars and workshops
• Financial websites
Slide 16
How Can You Protect Financial Resources?• Deal only with financial advisers you
know and trust.
• Keep good records.
• Verify account balances regularly.
• Guard passwords.
• Be aware of phishing.
• Guard against identity theft.